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India’s gold imports down by 13% in first nine months of 2018; domestic demand contracts 8% on a y-o-y basis

India’s gross domestic gold demand (jewellery + investment) contracted 8% in the first nine months of this year on year on year basis. While gold jewellery demand has contracted 12% on y-o-y basis, investment demand has increased by an estimated 11% based on our analysis. The acute fall in gold imports for domestic consumption has reflected the fact that consumers have been reluctant to buy gold this year.

By Debajit Saha, Senior Analyst, Precious Metals Demand, GFMS Thomson Reuters


Change in regulation impacted the supply

Change in regulations has been effectively changing the Indian gold market. The introduction of the Good and Services Tax (GST) last year has provided greater access to authorities to check the compliance standard; it has increased the traceability in the supply chain than what it was earlier and this has effectively has been changing the industry. It is now more difficult for traders to evade the lens of authorities and engage in business deemed unethical. On the other hand, last year in the month of October the Government of India changed the criteria for the nominated agencies eligible to import gold. The government has also banned export of 24 carat jewellery and medallions, which impacted the round tripping.

Previouslyfour star export houses from the gems and jewellery sector and five star export houses from any sector were recognized as a nominated agency (in the domestic tariff area) by regional authorities. In October last year it was scrapped and it was mandated that status holders could only import gold for the purpose of actual use, i.e. import of gold as input for the purpose of manufacture and export thereof by themselves to retain the validity of the nominated agency certificate. Since then imports of gold by nominated agencies have dropped drastically. This year nominated agencies haveimported only 46.5 tonnes of gold , to end- September and bulk of this gold is imported by paying the duty, which effectively means it is for the purpose of domestic use only. Last year by the same period, importswere 246 tonnes with equal share of duty paid (domestic use) and duty free (for export). Importswere higher in the first half of last year in the domestic segment as consumers bought gold before the introduction of the GST. It could be partly justified by retail jewellery consumption demand increasing to 185 tonnes in the second quarter, which would normally be closer to 150 tonnesfor the period (barring 2016 when it dropped to 74 tonnes as the government imposed excise duty on jewellery).

This year the demand has dropped to 147.8 tonnesfor the same quarter. The import of duty free gold started dropping from October last year after the notification was first released. Given there was no mechanism to track how much gold was consumed in the domestic market and how much was used for the purpose of export, trading houses with nominated agency certificates were engaged in round tripping (gold was imported under an Advance Authorisation license meant for export when the domestic premium was high and sold in the market). This was later repurchased from the local market at a lower rate, if not the same than the imported rate, and then exported in the form of 24 carat or 22 carat jewellery or medallions, which later were melted, refined if required, and re-cast into bars before returning to the supply chain. On the other, the direct import of gold by exporters surged a whopping 300% compared to the previous year. It stands at 155 tonnes so far this year (to end September), which is unprecedented.











The Import share  of banks has been substituted by theimport of dore by refiners

Banks’s import share has markedly decreased so far this year for supplying in the domestic market, sliding by 33% year-on-year. This has been substituted by the import of dore by domestic refiners by a similar percentage point change. This effectively means these agencies have supplied gold required for domestic demand. This comes in around 350 tonnes.

Scrap supply remained higher than last year

Higher supply of jewellery scrap this year than last year has prevented manufacturers from requiring fresh gold which also impacted the lower import volume. Scrap supply for the first nine months has increased by 64% yoythis year to approximately 103 tonnes.

Unofficial supply of gold

Anecdotal evidence shows that a decent volume of unofficial gold has been coming into the Indian market, which we estimate might be taking 15% of demand in rural and semi-urban areas. However, it has not had  much of a material impact on the final supply and demand trends aswe estimate that currently, around 100 tonnes of stocks are lying with the jewellers which could effectively be adjusted with the unofficial numbers.


Table 1 :Supply and demand comparison in the domestic market in first nine months of the year

In tonnes








Total Supply in Domestic Market

2017 End-Sept




2018 End-Sept











Total Demand in Domestic Market

2017 End- Sept




2018 End-Sept




Net Change













Source: Ministry of Commerce, GOI, GFMS, Thomson Reuters

India has imported only 111tonnes of gold in first two months of the current quarter, a drop of 26% from the same period the previous year. It shows demand is markedly lower than last year in the domestic market which will effectively impact India’s total consumption in the current year. Traditionally, the last quarter of the year is the best quarter for the market.  


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